Shareholders Rights When A Company Is Experiencing Financial Difficulties

Under Section 177(1)(f) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, a company may be wound up by the court, upon the application of a minority shareholder, if the court is of opinion that it is just and equitable to do so. Minority shareholders may exercise this right when a company is experiencing financial difficulties and it is reasonably foreseeable that the situation will persist.

Other examples where it may be just and equitable for a company to be wound up include:
1. Deadlock in management
2. Loss of mutual trust
3. Lack of confidence in the conduct and management of a company’s affairs arising from grave misconduct or potential grave misconduct by those in control of the company
4. Suspected fraud or wrongdoing such that the company’s affairs require scrutiny by the process of compulsory winding up order
5. Significant losses incurred such that there is no reasonable hope that the object of the company of earning profit is attainable

Normally, the court is reluctance in granting a winding-up order where an alternative remedy is adequate for the petitioner.